Business at Odds With Obama Over Russia Sanctions Threat

Jay Timmons, president and chief executive officer of the National Association of Manufacturers. Photographer: Andrew Harrer/Bloomberg

June 24 (Bloomberg) -- Two top U.S. business lobbies are
preparing to publicly break with President Barack Obama over the
prospects of more sanctions against Russia after months of
quietly raising their objections with the White House.

The U.S. Chamber of Commerce and National Association of
Manufacturers plan to run newspaper advertisements June 26 in
the New York Times, Wall Street Journal and Washington Post,
warning that more Russia sanctions risk harming U.S. workers and
businesses, said a person familiar with the plans, who asked not
to be identified to discuss private deliberations.

U.S. and European Union leaders have told Russia that it
risks a new round of sanctions on sectors of its economy unless
it takes steps to de-escalate the crisis in Ukraine. German
Chancellor Angela Merkel told members of her party yesterday
that sanctions designed to hit Russia’s $2 trillion economy are
on the agenda for a June 26-27 meeting of EU leaders.

Russian President Vladimir Putin tried to counter building
momentum for sanctions. He asked Russian lawmakers to revoke his
authority to use force in Ukraine and flew to Vienna today to
highlight a deal between Russia gas exporter Gazprom OAO and OMV
AG of Austria to build a natural gas pipeline.

The business associations’ advertisements assert that “the
only effect” of additional sanctions would be “to bar U.S.
companies from foreign markets and cede business opportunities
to firms from other countries,” according to a copy provided by
the person familiar with the plans.

Joint Statement

The ads, written as a joint statement from Jay Timmons and
Thomas Donohue, respectively the presidents of the manufacturers
association and the chamber, don’t name Obama. They instead
address actions under consideration by “some U.S.
policymakers.”

Sally-Shannon Birkel, a spokeswoman for the chamber,
declined to comment. Representatives of the manufacturers
association didn’t immediately respond to requests for comment
about the ad.

Laura Lucas Magnuson, a White House National Security
Council spokeswoman, said in an e-mail that the administration
has had “frequent conversations with business leaders on this
issue since the beginning of the crisis to understand their
concerns.” The U.S. can’t proceed with “business as usual,”
she said.

Putin Call

White House press secretary Josh Earnest, asked about
Putin’s statements about the use-of-force authority, said today
that steps by Russia to end support for separatists and move its
troops and equipment from Ukraine’s border “would make
sanctions, additional sanctions, less likely.”

Obama told Putin in a telephone call yesterday that the
U.S. wants to see action rather than promises, Earnest said.

The ads draw a parallel with the unpopular grain embargo
that President Jimmy Carter imposed on the Soviet Union
following its invasion of Afghanistan, a step that was later
reversed by President Ronald Reagan.

A trade association official, who asked for anonymity
because the objections haven’t been raised publicly, said U.S.
companies fear that even temporary, targeted sanctions would do
long-lasting damage to their export markets in Russia by
poisoning relations with Russian customers and raising the cost
of future financing as global banks reassess the political risk
associated with exports to Russia.

The official said sanctions targeted at even a limited
group of large Russian banks would damage export markets for
U.S. companies by slowing the Russian economy and making U.S.
goods more expensive as the value of the Russian ruble declines.

Potential restrictions on technology transfer would
complicate exports to Russia and particularly affect U.S. energy
companies that do business in Russia, said one person familiar
with discussions.

Private Discussions

Business representatives have sounded warnings for months
in private discussions with administration officials including
White House senior adviser Valerie Jarrett, Treasury Secretary
Jack Lew and Commerce Secretary Penny Pritzker, said the person
familiar with the effort.

The U.S. and EU so far have levied penalties against
Russian businessmen and companies linked to Putin’s inner
circle, as well Ukrainian supporters of the separatists. Putin
has threatened to retaliate against U.S. and European companies
if broader sanctions are imposed.

European Hesitation

There also is hesitation in Europe, with the U.K. concerned
about financial services, France about military sales, Italy
about luxury goods and Germany about overall trade with Russia.

U.S. officials say the sanctions now in place have fueled a
record $60 billion capital outflow in the first quarter of this
year, as well as losses in Russia’s stock market and currency.
Russia’s Micex Index increased 2.2 percent to 1,518.83 by the
close in Moscow, the highest since Oct. 22, after Putin sought
cancellation of the use of force authority.

The Ukrainian government and its U.S. and EU allies say
Russia is fueling conflict in the nation by allowing weapons
including tanks and anti-aircraft missiles -- like the one that
downed a military plane June 14, killing 49 soldiers -- to flow
to rebels into Ukraine across its border. They also say Russia
has provided manpower and other support to the rebels, who sent
representatives to Moscow last month to seek funding.